Escalating charges scare Bank clients

Bank of Uganda documents indicate that in 2009 (the most recent on the central bank website), getting account statements for a personal current account at Barclays bank were free.

Bank of Uganda documents indicate that in 2009 (the most recent on the central bank website), getting account statements for a personal current account at Barclays bank were free.

When Tony Ssenkumba, a foreman, was younger he always envied the people that queued up to make payments at the bank. Having a bank account seemed prestigious to the young man. The comfortable seats in the waiting areas, and the rich crowd in the banking halls triggered his curiosity.

However, his views on banking have drastically changed over the past ten years. The account he once craved so much is now a necessary burden and not a trophy for entering the salaried ranks. The raging fees make it harder every day.

The number of commercial bank accounts has stalled at just over 5 million in the last 100 years of banking. So, in order to grow revenues to meet the ever rising revenue targets and costs of operation, banks have had to increase their fees.

Bank of Uganda documents indicate that in 2009 (the most recent on the central bank website), getting account statements for a personal current account at Barclays bank were free.

Overtime, the fees for the account statements if accessed from a bank branch have risen to sh10,000 and most recently to sh20,000 per page at Barclays. The bank can freely show the account holder records of up to 90 days (3 months) on their online platform, however, anything longer must be accessed from a physical bank branch.

Withdrawals from an ATM machine have risen to around 1,000 per transaction but are much higher over the counter. Withdrawals from the ATM of another bank used to be sh5,000 but the fee has since risen to over sh16,000 before a 10% tax to the Uganda Revenue Authority (URA) is added to deductions.

Though salaries have remained nearly static, fees continue to mount. The fees for cheque leafs, overdrawn penalties and draft cancellation have been on a steady increase.

Standard Chartered Bank charges sh10,000 every month to maintain a personal current account. They charge an additional 2,500 in chip and pin card fees, before a sh1,250 excise tax is charged, bringing total charges to sh13,750 per month.

Several other banks follow a similar pattern. Over a year, the customer will pay 165,000 just to maintain the account. If all 5 million account holders were to pay the same account maintenance fees, the industry would make sh825billion.

Mobile money, the closest competitor to the banking industry has seen a meteoric rise since 2009 with transactions fetching sh32.5 trillion at the end of December 2015 which was higher than sh24 trillion the year before.

The number of registered mobile money accounts is at 21.1 million, a large increase from 18.8 million. Sensing the opportunity, some commercial banks have started issuing loans based on the credit history of mobile money users.

Andrew Muhimbise, a businessman says that the biggest irony about banking and the Ugandan population is that of you are financially literate you will want to leave banking.

"Banks have abandoned the real business model of using savings to create credit. They are making a lot of money from transaction charges. Stanbic bank used to charge a deposit fee on savings of sh3,000 because they were looking at their targets,

"I understand that they removed the charge but the damage was done. If you use mobile money, there is no charge for transactions of sh10,000 and lower,

"In Kenya, Equity bank has no charges but makes money by digging deeper to access people who are credit worthy to serve them. Ugandan banks have become transaction companies; they sentence you for opulence,

"They say they are upgrading with new technology but that comes at a cost to the customer," Muhimbise explains.